CRM for Fun and Profit, Part II: Costs

CRM for Fun and Profit, Part II: Costs

Some time ago I was at a Microsoft Convergence conference and was immersed in all things CRM. During one discussion the topic of the costs of CRM implementations came up. I distinctly remember one of the comments.

“The trouble with CRM projects is that the first 80% of the project takes the first 80% of the budget and the remaining 20% of the project takes the other 80%.”

I recall that we all had a pretty good laugh over this.

Like most humor, it’s funny because it’s true. The typical CRM project costs more than originally expected.

I think there are a few reasons for this. The first is most of us are unreasonably optimistic and tend to underestimate the complexity of the average project. This just doesn’t apply to CRM projects – it’s virtually every technology project. (See Management by Wishful Thinking for background on why this occurs.) Invest some time and though in the planning process in order to combat this.

A second reason is that companies try to go it alone and don’t get expert help. It is very difficult to get it right the first time; contracting some expert help can minimize the risk greatly.

A third (and biggest) reason is that the scope of CRM projects become broader than originally planned. There are several factors that influence this.

Business Processes: Your company probably has its business processes documented and there’s a good chance that they reside in some dusty binders resting on an obscure shelf somewhere. The challenge is that they are likely out of date. Processes change fairly regularly and unless your company is extremely diligent the documentation doesn’t necessarily get updated. And these are just the formal changes. Users develop their own shortcuts and workarounds and these never get documented. The processes in those binders are at best an approximation of what actually happens. So you are going to have to spend some extra time understanding the current state of your processes.
Organization: It’s not just business processes. To get the maximum benefit from CRM you have to make sure the culture and philosophy of the organization are themselves customer centric. Companies that are implementing CRM for the first time typically aren’t focused on the customer – they are focused on whatever product or service they offer the customer. The journey to becoming customer-centric is longer and harder than expected.
Another organizational consideration is who owns the customer? I have seen CRM create turf wars in organizations over ownership of the customer. Sales? Marketing? Customer Service? Does the regional office or national office own the customer? CRM requires a customer engagement strategy where this type of thing is defined in detail, or else your customers could be bombarded by disconnected messaging from various functions in your organization. Developing this strategy takes time and money.

People: Winning the hearts and mind of the users can be difficult. It’s great that CRM is good for the company, but what’s in it for them? There will be resistance because the implementation of CRM is creating a new area of subject matter expertise and likely diminishing the importance of some existing subject areas. That’s a difficult situation for the present subject matter experts. Change is always hard – it can be helped along by providing compelling explanations of the benefits that the users will get from CRM. Make sure that end-user training is complete and answers the ‘why’ questions as well as the ‘how’. Also remember that CRM can give you a lot of information on end-user productivity and that attention is not always welcome. The bottom line is that training and education will be a larger effort than you originally anticipated.

Integration: Most CRM systems are integrated with existing systems and data. Integration with existing systems is harder than you think it will be. There’s a number of reasons for this. It’s likely that, like your business processes, your current systems and data are inadequately documented. The effort to better understand your current state will again be larger than expected.

Once you understand what you have there is the issue of data quality. Data quality has numerous properties that need to be considered (accuracy, validity, timeliness, consistency and completeness). The older your data the greater the likelihood that a data quality effort will need to occur before this data can be integrated into the CRM system. This is not a trivial effort.
One more thought about integration – there are actually two integration efforts that need to be considered. The first is the initial data load, the second is the periodic (daily, weekly or whatever) update/refresh. The efforts are similar but different; plan to manage them as two separate and distinct efforts.

Security: CRM collects (and generates) a *lot* of data. It needs to be managed and safeguarded. Regardless of whether it’s on-premise or in the cloud, security, confidentiality and privacy of data is a big deal and by implementing CRM you have just made it bigger, particularly if any of the data is being exposed to the internet through a portal. Protecting the CRM data from unauthorized access from both internal and external sources needs to be considered part of the project.

Success: Success can be a problem. Once the business community starts to better see the benefits of CRM there will be pressure to broaden existing functionality or add additional capabilities. There will be demands to broaden scope and start adding these additional capabilities immediately, particularly if you are implementing CRM in a series of small releases. Indiscriminately adding scope to the project is an easy way to turn a 12 month project into one that takes 18 months. Ensure that you have a robust change control process defined or you may find yourself with a project that never ends.

CRM is worthwhile investment but it’s good to start with your eyes wide open. There are aspects to CRM projects that aren’t readily apparent at first glance; missing these can lead to increased costs, extended durations, unfulfilled expectations and general disappointment.

And who wants that?

photo credit: photosteve101 via photopin cc

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When it comes to data security …

When it comes to data security …

I was recently asked to participate in a group interview sponsored by Digital Guardian (a vendor of information technology security solutions) that centred on a simple question: “What’s the #1 biggest mistake companies make when it comes to securing sensitive data?”

One of the biggest challenges I had with this task is that it’s really difficult to narrow it down to a single mistake; unfortunately organizations make far too many mistakes (as the articles about data loss and breaches of privacy in the business pages of the newspapers can attest). But after pondering the question for a while I arrived at an answer that I really liked. Surprisingly, it’s not a technology issue.

When it comes to securing sensitive data the biggest mistake companies make is that they minimize or ignore the human dimension of security. There is a cultural aspect to security that must become part of the DNA of the organization; all too often they fail to make the essential investments to make it happen.

Organizations are willing to spend a lot of money developing the necessary standards, guidelines and procedures required by a comprehensive security program, and they are willing to spend even more on the technology required. Where organizations tend to drop the ball is the human element; staff needs to be acutely aware of the security policies, trained in the proper application of the policies and understand (and accept) their personal responsibilities and accountabilities. There needs to be a training regimen for both new and existing staff, as well as periodic refreshers. Security responsibilities should be built into their role descriptions and their personal objectives.

It’s also necessary that security be deployed in a manner that will allow staff to fulfill the responsibilities of their job while fully complying with the requirements of the program. The information security program cannot be a roadblock; its application must be proportional to the risks identified and it must support (and not inhibit) the ability of the organization and (and its staff) to conduct its business.

And a second mistake: Organizations implement a security program and think they’re done. They’re not. Security programs need to continuously adapt to in order to meet new threats and environmental changes. The security landscape is ever evolving, both on the side of threats and on the side of regulators; organizations need to ensure that their security programs change in response.

Care to see the other 33 opinions? You can find them on the Digital Guardians blog.

photo credit: -Tripp- via photopin cc

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CRM for Fun and Profit: A Primer

CRM for Fun and Profit: A Primer

How your organization can leverage relationship management to drive growth and profitability

So … you are thinking about implementing CRM, or you’ve decided to implement CRM (or maybe it’s been decided for you) but you are not sure where to begin. There are any number of software vendors that would love the opportunity to sell you their software right now (because it’s their quarter-end now and the deals are just too good to pass up and the software is all you really need and could you sign right here please?). In this case resistance is not futile; politely decline, take 15 minutes and read on to get a better understanding of what lies ahead. CRM (Customer Relationship Management) has been part of the business landscape since the mid-1990s. The initial offerings were little more than enhanced contact management systems but in the twenty years since then both the philosophy and technology of CRM has matured and evolved to the point where CRM can be considered a mature offering; it represents a viable business strategy for an organization to follow.

Objectives of CRM

Any discussion of CRM would be incomplete without a reminder of the primary goal of the typical business: it exists to make money. Implementing CRM requires a significant investment in people, process and technology; the end result needs to deliver sufficient revenue to offset the initial investment and the continuing operational costs. CRM doesn’t necessarily make sense for all companies. If you are selling low-cost commodity items to the general public, like laundry detergent or a pound of butter you probably don’t need to establish a relationship with your customers (nor are they likely to want a relationship with you). But it’s different if you are selling a higher value, customizable product or service, like a financial product, a car or a vacation. There is value in understanding your customer and using that understanding to establish a long-term relationship. The fundamental objectives of CRM are twofold:

  • The first is finding the right customers and establishing long-term relationships with them. CRM is not particularly concerned with the value obtained from a single transaction with a customer; its objective is to develop enduring relationships and drive revenue and generate profit over a lifetime of transactions with the customer. Customer retention is paramount; customers are viewed as assets rather than just the buyer on the other side of the single transaction.
  • The second objective is increasing revenue through obtaining a larger customer ‘share of wallet’ – building a broader, more profitable relationship. In addition to increasing the length of relationships, CRM also strives to expand the breadth of relationships by more fully engaging customers and having them utilize a fuller range of the total goods and services provided by your organization (or by a partner organization).

It is critical to note that the value derived is mutual. Your company receives revenue, but the customer receives something valuable in return. He deals with a company that understands him (sometimes almost anticipating what is needed), actions requests promptly and accurately (following up when required), and treats him in a way that reflects the value and importance of his business. Following the principles of CRM allows your organization to provide to the customer the type of experience that he values. (Just a note: I know there are organizations that aren’t driven by profit, such as government agencies, not-for-profit, charities and the like. CRM can make sense for them too by ensuring that they deliver their services to their customers as effectively and completely as possible.) CRM became a very popular buzzword in the early 2000s, but most companies that implemented it were unable to fully realize the potential of CRM. Significant investments were made in tools and training, but few companies changed their organizational philosophies and strategies to align with a CRM approach. This need – to move away from traditional strategies towards those that are more customer focused – is the biggest barrier to the adoption of strategic CRM. If you take away anything from the document it needs to be this: CRM is a class of technology products but it is also a business philosophy that requires significant and fundamental changes to your organization to implement fully. But it can (and in many cases, should) be done.

The Fundamentals of CRM: 8 Factors to Consider

Before you look at CRM as a business philosophy you need to consider the fundamentals.

1.   It’s about the Customer

At its very core, CRM focuses on engaging with customers on a one-to-one basis. The goal is to satisfy the needs of the customer, but this also gives your organization the opportunity to better understand who customer is, what they value, how they wish to be engaged, their opinion of your organization and perhaps even what the competition is offering. Every contact with the customer is an opportunity to engage them in a deeper/more complete manner. CRM is a very long term strategy; one where time is measured and success is determined over the period of years and decades rather than months and quarters. In following a CRM-focused strategy, the organization must move from a product-based volume selling approach where the focus is on short term results to a strategy that concentrates on delivering what customers want when they want it over a much longer term. This approach – mass customization at the level of the individual customer – requires that an organization:

  • understand the needs and preferences of each customer
  • provide personalized offerings
  • provide ‘a perception of value’ (or value proposition) to each customer
  • retool technologies and processes to support CRM
  • partner with organizations that share a CRM-based business strategy
  • not have the need to maximize the profit from each individual transaction

Achieving this requires a complete rethink of how the organization operates. What culture needs to be in place for a relationship based approach to succeed? Ultimately there are two prevailing characteristics: it is patient, and the customer relationship is the primary focus of the organization. Sales, distribution, product – all remain important but are viewed through the lens of the customer relationship. At a one-to-one level, CRM is about ensuring that each and every customer feels that they have a personal relationship with your company; that the person on the other end of the telephone line (or web chat, text message or email) knows who they are, how they like to be engaged and understand what it is they need. CRM enables this by providing to its users a deep and comprehensive understanding of each customer. This degree of intimacy cannot be achieved without leveraging technology. The CRM application, the internet and communication capabilities (such as portals, email, telephone, web chat and social networking) can all be deployed and exploited to aid in establishing long-term, mutually profitable relationships with customers. One of the key differences between today’s environment and that of twenty years ago is the internet. The internet and the ‘always connected’ society changes everything and provides you with two opportunities: the ability to inexpensively create and execute marketing campaigns (that can range from mass marketing to large groups to selectively marketing to individuals), and increased access to information, both for your organization and for your customers. Organizational websites now allow a level of access to information and data that would have been unthinkable just a few years ago, and the advent of social media has added an additional dimension (as well as additional complexity) to the customer/company relationship. CRM allows an organization (through better understanding of their customers, their preferences and their history of interactions) to leverage the internet to better (and more completely) engage their customers, in both outbound and inbound interactions. CRM is about defining who the ‘right’ customers are for your organization. All customers are not created equal; segmentation of customers into logically related groups is essential for successful relationship marketing and servicing. Once this is determined, you can define how those segments will be served. (It is worth noting that customer needs and expectations are a moving target, and as needs and expectations shift your organization needs to respond accordingly.) Customers should be valued based on the current value they bring to the company plus the potential future value that they can be expected to deliver. The criteria used to create the segments are unique to each organization, but I believe there needs to be at least 4 segments:

  • Which customers are our ‘best’ customers – who do we focus on?
  • Who are our average customers – can we promote them?
  • Who are our less than average customers – how can we better engage them?
  • Who are our worst customers – who do we fire?

The best customers, those that provide the best total value to your organization, are the customers that should receive the best value in return. Remember Pareto – 20% of your customers drive 80% of your revenue. You need to decide what you are willing to do differently for high value customers. For the high value segment you could create an exclusive product, a custom website or perhaps provide concierge service with shorter turnaround times or better loyalty rewards. Customer care is the true ‘value-add’ of relationship management; it’s what can determine the success (or failure) of the entire customer experience. It goes beyond the transactional nature of customer service activities to the determination of what needs to be done, again on a one-to-one basis, to make the products and services more attractive to each specific individual and to increase the bond between them and your organization.

2.   Customer Measurements

Proper segmentation of customers can only be achieved once the required metrics have been established and a measurement program is in place. The prerequisite to achieving this is sufficient performance data. Your organization needs to be able to measure the performance of each channel and of each customer. CRM captures a great deal of data – interactions with the customer, administrative events (e.g. a bill payment or a change of address), personal data (preferences, demographic, financial and psychographic) and relationship data (how the customer relates to other customers [e.g. households or sales teams]). On an individual level this data provides you with the necessary information to tailor interactions with each specific customer – to engage the customer in the way that he wishes to be engaged. On a macro level, once all this data is aggregated you can interpret the information and perform detailed, complex analyses and data mining activities to uncover nuggets of knowledge that would otherwise remain hidden, and then leverage these insights for the benefit of your company and the customer. CRM relies heavily on analytics for gaining knowledge and insight about their customers as well as the effectiveness of their operations. Successful analytics requires data (organized in a manner that is conducive to analytics) as well as the necessary expertise to perform the analysis efforts. Neither of these is easy to come by; establishing an analytical capability typically requires a significant commitment. Fortunately analytics is an area where an organization can start with simple measures and evolve to more complex approach over time. The analytics effort can include such metrics as:

  • Developing simple trends based on single factors like geography or product
  • Analytics that look at the profitability of individual customers and accounts
  • Analysis of customer behaviors and the factors behind the customer’s decision making process.
  • Differentiation of service delivery for different customer groups (for instance, through a customer segmentation strategy)

One of the key metrics is customer satisfaction, although ‘satisfaction’ is probably not a descriptive enough term. A typical customer expects to be satisfied; successful relationships are not likely to be built if satisfaction is the target. Organizations need to exceed satisfaction and move towards building customer loyalty. Part of a successful CRM effort should concentrate on moving your customers towards developing an affinity with your company and brand. It’s much harder to lose a loyal customer than one who is merely satisfied. Measurement is a two-way street – you also need to allow customers to measure your organization’s performance. The ability to listen to customer feedback and capture their views and opinions is a basic capability of CRM. The explosion of social media and of customers who are more than willing to proffer their opinions, is a logical starting place. The challenge is to rapidly triage the information that is captured and act decisively on those that will have the biggest impact to the customers as a whole.

3.   The Value Proposition

The value proposition that you offer to your customers is another key fundamental of relationship management. The development of the value proposition – what you are promising to the customer – needs to consider numerous questions, including these eight:

  • What products and services do our customers want (and how much are they willing to pay for them)?
  • What products and services will we choose to provide?
  • What investment are we willing to make in people/process/technology to support the creation and delivery of products and services
  • How can provide these products and services?
  • What scale is required?
  • What level of quality will be provided?
  • What value does the customer receive, and what value do we receive?
  • How do we demonstrate the validity of the value proposition?

4.   Capabilities

In order to deliver on the value proposition your organization need to develop a suite of capabilities to support the delivery of its chosen products and services. The capabilities of an organization need to be marshaled around meeting the expectations of the customers and fulfilling the value proposition. The capabilities question is one that needs to be asked very early in the CRM process. Following a CRM approach is not inexpensive, and an organization needs to decide how much of an investment it is prepared to make. It is better for your organization to focus on a limited set of capabilities and deliver them very well than to choose a wide breadth of capabilities and deliver them in a mediocre fashion. (An alternative approach to CRM is to approach it tactically, but more on that later). Capabilities include business processes. Developing processes that are ‘CRM-friendly’ is different than conducting a traditional process reengineering effort where the focus of the effort is the design of efficient functional processes. The intent of a CRM focused process is to deliver maximum value to the individual customer; the process needs to be intelligent enough to recognize what the customer values and flexible enough to deliver it. The primary goal of CRM processes is not concerned with delivering maximizing efficiency (work deliver per time unit) but on delivering effectiveness – maximizing the value exchanged during the interaction. And CRM processes are designed to facilitate the measurement of cycle times and the performance of individuals or groups. Capabilities also includes technology. CRM is also about computing, and it’s a complex undertaking. The CRM system itself, the integration of multiple supporting applications and data sources, storage of large volumes of data, the development of portals that allow customers access to information, the mining of data and the associated historical and predictive analytics are the primary areas where investments in computing technology are required. It’s definitely not trivial. Which comes first, the technology or the processes? It’s really an iterative approach. When using commercially developed software, in virtually every instance it makes most sense to build the business processes around the capabilities of the technology rather than adapting the technology to the business processes. But before the software is acquired it’s necessary to define the business processes in sufficient enough detail to ensure a good fit between how the business expects to run and how the technology can support it. Once the software is acquired the business processes are optimized to leverage the capabilities of the software. This approach results in processes that are streamlined, efficient and tightly integrated with the technology. Procuring software without a clear understanding of the anticipated business processes is a recipe for disaster. Software can (and should) be configured to deliver the ideal end user experience, but customizing software is something that should be avoided at all costs. When software is customized it is actually being modified to perform a task that it was not designed to do, and results in highly modified software that requires significant cost and effort to support (and has likely strayed from the upgrade path). Configure to your heart’s delight but customize at your peril.

5.   Organizational Considerations

Organizations that focus on CRM move customer information as close to the front line as possible and provide the individuals who interact directly with customers the ability to make as many decisions as possible without need for approvals or the handing off of the request to more senior staff. The move from order taker to decision maker is a shift of significant proportions. Your organization will have to look at all aspects of human resources, training and talent management to make this transition successful. (Be prepared; not all your staff will be able to make the necessary transition.)

“People are the key to any relationship. Business is still people, but these people must be supported by technologies and processes to multiply their capabilities and make them even more effective ….The people at the front lines should have the ability to communicate with customers in a manner that recognizes them, remembers their contact history, understands the current customer issues, predicts anticipated behaviors and suggests appropriate responses, solutions or suggestions. Increasingly, the front-line people are becoming consultants, working with customers to add value to their company. This is a marked departure from historical practice and requires recognition, reward and incentives that support this redirection.”

Ian Gordon, ‘Relationship Marketing’

It also requires that organizations modify their structure to support CRM. Rather than having traditional product managers it may be necessary to organize by customer segment and have managers for each of these segments, or perhaps to change the focus of acquisition efforts to concentrate on finding customers who most closely match the profile of an ideal customer; not necessarily just someone who wants to make a purchase. No process or technology will provide the anticipated benefits unless trained staff is available to do the work. CRM is a complex undertaking, and the people, process and technology must work in harmony to deliver a customer experience that meets the expectations of both the customer and your organization. This can’t happen without thorough training at initial implementation time (as well as when new hires are brought on), supplemented by periodic refresher training. In conjunction with the training, the appropriate supports need to be in place to reinforce the training. This includes processes, rewards, and recognition for individuals who actively advocate and promote the building of relationships with customers, co-workers and partners. All this requires leadership. The leaders of a CRM-focused organization need to ensure that the organization stays true to its strategy. While strategy defines what your organization will do, perhaps more importantly it also defines what your organization will not do; it is the responsibility or the leadership to ensure that new opportunities that arise but fall outside of the adopted strategy are either not pursued, or are acted upon with a full understanding of the impacts on the existing strategy.

6.   Profitability, Value and Cost

Profitability of your organization is normally driven by two variables: growth and the efficiency of its operations. While neither of these variables is exclusive to a CRM-based approach, the strategies that you follow in pursuit of profitability will shape your adoption of CRM. These include:

  • Controlling the cost variables associated with the people, processes and technology as closely as possible
  • Developing and deploying new and improved products and services (and ensuring that the customers are engaged in the design)
  • Establishing new revenue streams – new channels and partners
  • Servicing customers in the appropriate manner in order to maintain the required persistency and retention
  • Terminating the relationship with low value customers

7.   Collaboration and Integration

CRM is about collaboration – bi-directional interactions between an organization and its customers. It’s conversational. Customers want their needs met and concerns addressed. We live in an age where information is king and access to that information is demanded. Customers expect visibility into internal processes that in the past were hidden from view. (Imagine ordering from Amazon and not being able to track your order.) This visibility is the new norm and it will require that you open up internal processes to customers in ways not previously considered. And it goes beyond sharing of transactional information; customers want to contribute in to such efforts as product design or the provision of new or improved services. The explosion of social media and the willingness of people to share their opinions is something that organizations can benefit from. When the customer speaks the organization needs first to listen and then to act. Regardless of the channel employed (which may include e-mail, webchat, SMS, IVR, social media and in some cases regular mail or a face-to-face interaction), when a customer engages an organization some action needs to take place. The key is to reduce the time of the decision cycle as much as possible to allow the action to be performed real-time and if not real-time then as quickly and transparently as possible. (How quickly? That’s determined by the service levels that you have defined.) At an enterprise level, CRM can help reach across departmental and functional boundaries in order to provide complete solutions to customers. It aligns customer touch-points so the customer experience is consistent across people, departments and even organization. By capturing and sharing all customer interactions you develop an ‘institutional memory’ that gives all employees an understanding of a customer’s history. There are three perspectives on collaboration that need to be considered:

  • Internally, within teams and across teams
  • Externally, with customers
  • Externally, with partners

The collaboration must extend beyond the customer relationship into secondary relationships – your partners and suppliers – and the potential of providing value-added services. From your organization’s perspective, who actually provides the product and/or service is immaterial as long as the organization continues to own and manage the relationship with the customer and can derive some value from it. From the customer’s perspective, their relationship continues to be with a single organization – the delivery of products and services by third parties occurs transparently.

8.   Manufacturing and service capability

The rapid development of new products or services is a prerequisite to meeting the needs of your customers. Bringing a new product to market in a timely manner is essential to successful CRM, as the product design should be driven, at least in part, by the needs and requirements of the customers. Ideally, the product development process should be efficient enough to allow the customization of specialized products for specific customers or customer segments. The same holds true for service capabilities. Again, customization is key – the ability to adapt the service process to the needs of the individual or segment being serviced is a prerequisite for the success of CRM.

Non-Strategic CRM

In looking at the previous 8 considerations maybe you’ve lost your appetite for taking a strategic approach to CRM; it’s quite a lot to handle. Perhaps for your organization taking a tactical approach makes more sense. It still requires that you establish the necessary capabilities for CRM but represents a much smaller commitment in both time and money than a strategic approach. There are several fundamentals of CRM that are more tactical in nature and could be implemented independently of a larger CRM strategy. One reason for taking this approach is to deliver value to the organization in the short-term and demonstrate some ‘wins’ to the business stakeholders and CRM users.

Customer Segmentation

You can easily apply simple segmentation rules to your customers. At a tactical level, the main benefit of doing this is the provision of different levels of service to the different segments, most notably lower cost service to lower value customers.

Capture of all customer interactions and events

Tracking of all customer interactions and events and capturing this information in a CRM allows all employees (subject to security and privacy considerations) of an organization to have a 360º understanding of that customer. Of particular importance is being aware of other dealings that the customer has had with the organization. From the customer’s perspective, this prevents the need of the customer to re-educate the organization about past interactions and requests on every new interaction and help for a relationship to be established between the customer and the organization, not between the customer and a specific employee in the organization. Capturing historical data also permits the running of simple analytics independently of a larger business intelligence effort.

Rapid and accurate fulfillment of customer requests

Although ‘one and done’ was the mantra of the original CRM implementations, what is more important is the rapid and accurate servicing of requests. Many customer requests that appear simple on the surface are more complex underneath, requiring a multi-step workflow to complete. CRM can ensure this happens by accurately capturing the request and then orchestrating the workflow required to properly complete the request.

Measure and continuously improve

Using CRM to capture all interactions with all customers allows an organization to accurately measure its service times for every customer facing interaction. These measurements should be used to determine where bottlenecks exist within business processes or staffing levels and to then readjust the process accordingly. Depending on the granularity of the data, it is even possible to measure the performance of departments, teams and individuals.

More complete service

CRM allows the delivery of more complete and individualized service. It’s all about understanding as much as possible about the customer. Knowing what the customer wants and, perhaps more importantly, how the customer wants to be engaged allows an organization to hit each individual customer’s ‘sweet spot’ and drive engagement and loyalty.


CRM allows for the establishment of a relationship between a customer and an organization; what is essential is that the relationship be long-lasting. By determining the variables that establish customer loyalty and putting programs in place to leverage this loyalty, CRM can increase the ‘stickiness’ of relationships. Even tactical CRM requires a substantial commitment of money and time; it’s not an initiative to be undertaken casually. Regardless of the approach taken, CRM can be the path to higher revenues, more (and more loyal) customers and increased profits. It’s worth thinking about; your customers are waiting. Just remember, it’s about far more than buying software, no matter how attractive the price.

Alan Baker is the President of, a boutique consulting firm based in Toronto, Canada. He has led or directed projects (including CRM implementations!) that modernized technology, re-engineered business processes, improved organizational effectiveness, introduced processing efficiencies, won awards and spurred and accommodated remarkable growth.

photo credit: hz536n/George Thomas via photopin cc

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How to make better decisions

How to make better decisions

Can a fighter pilot can teach us something about decision-making? For a long time I viewed a decision as a point-in-time event. It seemed pretty straightforward – gather the pertinent facts, consider them and then make the decision. I was much more concerned that the decision was made rather than how it was made; any delay in making a decision would impact my project schedule and I sure didn’t want that to happen. Over the years I learned to better prepare the decision makers, and I learned to build some slack into the schedule around decision milestones. It wasn’t until I looked back at some of the decisions made, by both myself and others, and realized that while some very good decisions were made, there were quite a few that were sub-optimal, and other decisions were just plain bad. I wondered if following a generic decision making process or framework could improve the quality of decisions. This brings us to John Boyd. John Boyd was a fighter pilot who served in the Korean War. He was also a mathematician, an aircraft designer, a military analyst, a historian and a philosopher. His accomplishments include being:

  • Widely acknowledged as being the best fighter pilot in the history of the USAF
  • An air-to-air combat tactician
  • Directly responsible for design of the F-15 Eagle, F-16 Fighting Falcon and the F-18 Hornet
  • Indirectly responsible for the design of the A-10 Thunderbolt
  • A military strategist – one of the primary planners of Desert Storm (the 1991 invasion of Iraq)
  • A major contributor to the study of decision theory

His work on decision theory started when he looked at the outcomes of aerial dogfights between the American F-86 and the Russian MIG-15 in the later stages of the Korean War. In comparing the two planes, the MIG-15 had a higher top speed, a greater operational ceiling and a better turning ratio; three capabilities that should have stacked the odds in favour of the Russian plane. But the actual kill ratios were close to 14:1 in favour of the American plane. An easy assumption to make was that the skill of the American pilots was the deciding factor, but that not the case. The study concluded that there were two design elements of the F-86 that resulted in the lopsided results: a bubble canopy and a fully hydraulic control system. The bubble canopy gave the pilot better visibility and allowed him to gather more complete information before he made a decision. The hydraulic control system allowed the plane to react more quickly to the pilot’s commands once the decision was made. The combination of better informed decisions and accelerated execution resulted in devastating superiority in combat situations. Boyd continued with this train of thought; over the ensuing years he developed a decision support construct that he called ‘The OODA Loop’. It’s also known as ‘the decision cycle’. OODA is an acronym for Observe-Orient-Decide-Act. Boyd’s belief was that decision making occurs through the execution of a series of iterations through this loop, where the decision-maker repeatedly evaluates his situation, makes decisions, acts and re-evaluates and continues until the outcome is reached. His focus was on military matters and more specifically on fighter pilots; he was documenting the optimal process that a pilot should follow in determining his circumstances, gathering and evaluating information, determining the proper course of action and taking it. Success was determined by the validity of the information, accurate evaluation and rapid decision making and execution. It’s sometimes simplified into a diagram that looks like this: OODA Loop Unfortunately this diagram is a gross over-simplification. (It also looks an awful lot like Deming’s Plan-Do-Check-Act cycle.) When Boyd finally got around to drawing the diagram, it looked like this:

Source: Wikipedia

Source: Wikipedia

The first time I saw this model I wondered if it could be applied to projects or to change management, particularly transformational change. Is there a business application? One thing that is apparent is that the OODA loop is misnamed; it’s not a loop, it’s a network of loops that connect each of the stages in various ways. Another thing that may not be so apparent is that the model is much more reactive than proactive. The goal of the OODA loop is more tactical than strategic. It’s not used to define and attain specific objectives – used it’s to increase the quality of decisions and the speed with which they are made. And it’s worth noting that while it has a military heritage the terminology leans more to the scientific method (which is appropriate, because Boyd used such varied sources as the Second Law of Thermodynamics, Heisenberg’s Uncertainty Principle and Gödel’s Incompleteness Theorem in the development of his theory).


The observe stage is fairly straightforward – it’s gathering information about the current situation. It looks at the environment, external information, internal information – I would call it a ‘current state model’. From the military perspective it’s concerned about what both you and your enemy are doing. From a business perspective it’s more about your organization’s vision, strategies and capabilities, the marketplace and what your competitors are doing. Think about the contents of a SWOT matrix – that’s the type of information that needs to be collected. One of the challenges of the observation phase is making sure that your observations are complete and ensuring that you are focusing on the correct information.


At one level the orientation phase is equivalent to the traditional analysis phase of a project or change initiative; it can be viewed as a situational analysis. However in Boyd’s model it goes deeper than that; it becomes a complex assessment or interpretation of the observations previously made, viewed through several different lenses. He realized that our analysis is distorted by our previous experiences, our heritage, traditions and value systems. They act as screens that filter out some of the information. Care must be taken to ensure that information isn’t filtered out for the wrong reason. The OODA model requires objectivity; it’s required to cope with our inherent biases and predispositions. This ensures that all information is considered, even that which doesn’t necessarily fit in our world-view. Ultimately, the goal of this phase is to analyze all the information and synthesize it into one or more actionable plans. Here’s a personal example.   My first car was a used 1971 Datsun 240Z. When it ran it was a great little car. Unfortunately it spent far too much time not running; it was spectacularly unreliable, in need of constant repair and was a colossal (and expensive) headache. I was not that sorry to see it go. Fast forward thirty-three years. I’m shopping for a new car. Do I go into a Nissan dealership? No, I don’t. Even after all that time the memory of the 240Z causes me to deselect Nissan. It’s neither reasonable nor rationale, but there it is. The amount of time spent in the orientation phase is another critical consideration. Too little time and the analysis and synthesis efforts are not adequately informed, leading to unreliable scenarios. Too long a time (‘analysis paralysis’) and the observations lose their validity; too much has changed between when the observations were made and when they were acted upon, resulting in scenarios that address the wrong things.


The decision phase is just that; choosing the best scenario from those that were developed. The criteria could be anything and may include a combination of risk/reward, ROI, time to market or any other of a host of variables. It’s considering how your enemy (or competitor, marketplace or maybe even your own organization) will react to the change and then picking the scenario with the best fit. What I find interesting is that Boyd has used the word ‘hypothesis’ in conjunction with the word ‘decide’. To me this implies, in a manner similar to the scientific method, that the decision needs to be tested. It predicts an outcome but the results need to be examined in the next phase before the decision can be considered correct. And this in itself is interesting, because it’s been my experience that individuals and organizations don’t normally test their decisions; they just assume that the decisions are correct and continue as if they are, sometimes even after it’s apparent that they aren’t!


The act phase executes the decision. It’s testing the hypothesis and evaluating the result. It is only after action has been taken that the correctness of the decision can be properly evaluated. This evaluation as well as all the other information gathered during the execution of the cycle are captured for use in the next iteration; this closes the loop and either completes the cycle or beings the next execution. There’s one other aspect of the model that’s worth examining – ‘Explicit Command and Control’. In the military these could be considered the chain of command and rules of engagement; in business they are organization charts, regulations, policies, procedures and operating principles. Sometimes command and control has the effect of short-circuiting the decision cycle by limiting the solution space and reducing the number of possible scenarios. If can also cause problems by micromanaging and overcontrolling, or by abdicating its responsibility and not managing. Command and control also monitors execution of the decision cycles to make sure that things are progressing smoothly. It’s important to note that there is not just one decision cycle occurring at any one time; there are any number of decisions cycles occurring simultaneously. I visualize them almost like a stack of pancakes.   Everyone is involved in a cycle – from the general down to the private (or the CEO to the mail room clerk). Part of command and control is ensuring that these concurrent cycles are aligned and are executing in harmony.

Speed – The Key Factor

The key to success is speed. The OODA loop must be executed rapidly. In the military application of the OODA loop, the key to victory is getting inside your adversary’s decision cycle; making him react to what you are doing until he is unable to continue, at which point he is defeated or quits the field. Victory favors the side that can recognize changes in a dynamic environment (Observe), analyze and synthesize appropriate responses (Orient), choice a response (Decide) and execute it (Act) and do so rapidly and decisively. It’s no different in business. Organizations that can adapt to dynamic situations and that can execute their plans rapidly have much greater likelihood of success.

Projects and the OODA Loop

What do we need to consider if we want to implement a decision making model like the OODA Loop in our own projects or change initiatives? When we observe, we need to observe as completely as possible. Capturing just a subset of the available information provides a false sense of confidence and will likely result in problems as the process moves forward. It’s a lot like the parable of the blind men and the elephant; you may understand part of the situation but you will never perceive the complete whole. When we orient, we must continue the holistic approach and take a comprehensive look at all the information that is available, including our own perceptions and biases, and build one or more plans of action. In doing so we triage the information, deciding what is essential (and should be retained) and what is irrelevant (and can be discarded). Make sure that outlier information is not discarded just because it is an outlier; make the decision to discard information a conscious one and not just a convenient one. Decision balances the risk and reward of the plan(s) of action and selects the best option. The longer the decision takes the higher the risk; what we have observed may no longer be true, the conclusions of our analysis may be based on incorrect information, the plans developed may not be addressing the correct issues. And in order to manage risk the decision should almost always be tested in a controlled environment before being implemented in a more widespread manner. Then we act – quickly and decisively. Allow me to go off on a tangent for a moment.   In his book Sources of Power: How People Make Decisions, Gary Klein describes a study that was performed on the decision making by firefighters; specifically the process that captains used to decide how best to fight any given fire. The assumption was that the captain would develop multiple approaches and choose the best one. But that’s not what happens. After arriving at the scene the captain quickly assesses both the fire and the resources he has on hand; based on his assessment he immediately constructs a single plan that he believes to be best. He then takes this approach and tests it mentally. If it passes he immediately implements it; if it fails he tries to adjust the approach to compensate for the failure, and if he cannot he constructs a new approach, continuing the iterations until he arrives at an acceptable approach. Klein also documents at least one situation where a volunteer firefighter brigade spent 3 days trying to extinguish a refinery fire before calling in professionals.   The professionals put out the fire the next day. Based on this, I think it’s valid to assume that expertise is a requirement for effective decision making. Working with an individual who has experienced similar situations is a tremendous asset to the decision making process. They have learned what is material and what isn’t and can add their knowledge to the information gathered and the analysis and synthesis performed. Their expertise allows them to recognize conditions and qualities that may otherwise go unnoticed. This knowledge doesn’t even have to reside in an individual; any formal ‘body of knowledge’ can fulfill the same role. Finally, speed. The decision process needs to be executed with a sense of urgency. There are constraints to how fast the process can be proceed, but to be successful those constraints can’t be administrivia, bureaucracy or individuals who, for whatever reason, are unable to make a decision. Decision making is serious business. In a military setting good decision making can be a matter of life and death. In business it could mean the success or failure of your career, your project or, in some extreme situations, your business. Good decisions are more likely to happen if a decision-making process is followed; any framework is better than none. I think John Boyd’s OODA loop is worthy candidate for your consideration. John Boyd died in 1997 at the age of 70. He was buried with full military honours at Arlington National Cemetery in Virginia. Interested in learning more about John Boyd? Can I suggest: The John Boyd Compendium – The Mind of War: John Boyd and American Security by Grant Tedrick Hammond Boyd: the fighter pilot who changed the art of war by Robert Coram photo credit: mrBunin via photopin cc

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Bridge to the Future – a stellar example of forward-thinking design

Bridge to the Future – a stellar example of forward-thinking design

Let’s talk about another bridge.

It’s about a mile and a half north of the Queen Street Bridge.  Its official title is “The Prince Edward Viaduct System”.  It was completed in 1918, and like many public works projects of that time it was named after a royal. Its namesake, Prince Edward, was the Prince of Wales at the time; he was destined to become King Edward VIII. He was also destined to abdicate the throne and lived most of the rest of his life in exile in France (where he was accused of being a Nazi sympathizer). Prince Edward and his story feel like ancient history; maybe this is why virtually all Torontonians know it as ‘The Viaduct’.  These facts by themselves do not make this bridge important.

The bridge was needed to connect central Toronto with its eastern boroughs. It took a while for the general populace to warm up to the idea; the most contentious issue was the cost.  There were multiple referendums before the construction was approved in 1913. The Viaduct spans the 600 yard wide Don River Valley. The valley is a product of the last age of glaciation. What used to be a ranging torrent is now really just a creek; the present day Don River is only about 20 yards wide, gently flowing south towards Lake Ontario before it vanishes into the Toronto docklands. Again, these are interesting facts but by themselves do not make this bridge important.

A recent addition to the bridge is a structure called ‘the Luminous Veil’.   Despite the ethereal sounding name it has a sobering purpose – it’s a suicide prevention barrier.  Over the years people intent on committing suicide seemed drawn to the Viaduct, so much so that it became the second most common location in North America to commit suicide (the Golden Gate Bridge in San Francisco has the dubious distinction of being the most common). The Veil has been very successful at preventing suicides at the bridge, but sadly the numbers across Toronto haven’t declined; studies have shown that people have found other bridges. The Luminous Veil is important for what it represents, but it’s not what makes the bridge important.

The reason it’s called a ‘viaduct’ is that the bridge is constructed of a series of concrete and steel arches that is reminiscent of a Roman aqueduct. The road surface manages 5 lanes of traffic; underneath the roadway is a dual rail line that is used by Toronto’s subway system.  The Bloor-Danforth subway line runs east-west across the city; it opened in 1966. The Toronto subway system is not as extensive as those found in other cities like New York, London or Paris, but it is absolutely essential in helping the city function. Over 1.5 million passengers are moved by Toronto transit every day and many of them travel on trains that cross the Viaduct.

It’s not until all the facts are tied together that the significance of what the bridge represents becomes evident. Just to summarize – construction of the bridge completed in 1918. The design of the bridge included a capability for rail traffic. The Toronto east-west subway line opens in 1966.  What is important is this: The designers of the bridge incorporated a feature into the design a full 50 years before it was required.

They accepted the additional cost in order to create something that had no current utility but had an incredible future value. When the subway line was constructed the Viaduct required next to no modification to accommodate the subway. (Let’s give them credit – their names were Edmund Burke and Thomas Taylor.) 

This is in stark contrast to what happens today on the average business project. The goal seems to be to minimize costs at the expense of functionality; it’s been my experience that most people, especially business leadership, are much more comfortable with removing features in the name of cost-savings than they are with adding features and adding to the expense.

The word ‘expense’ is at the root of the problem. Money spent on change can be viewed as an expense or as an investment. Unfortunately in today’s environment the former view is predominant, and like any expense the preference is to make it as small as possible, or eliminate it altogether. Investments, on the other hand, have the goal of generating value – you are paying now for a potential future return.  I think what we need are more leaders who can see beyond the cost of change, and instead look at the value that it will generate, even if that value is not realized until sometime in the future. Although 50 years is probably too long a wait!

The future is notoriously hard to predict. There are no guarantees when it comes to organizational change; it takes a degree of courage to invest your company’s money (not to mention your reputation) on a course of action where the outcome is not certain. But the risk can be managed. Do your research. Be reasonable in your assumptions. Temper expectations. Have contingency plans.  Assemble a good team. These are all prerequisites – ignore any of them and you are no longer investing, you are gambling.

And let’s be honest – sometimes the investment doesn’t pay off.  The Rosedale Valley Viaduct is the next bridge in the system, and if you stand underneath it and look up you will see the same rail lines but you won’t hear the rumbling of subways.  These lines aren’t used; use of the bridge required a turn in the line that was just too abrupt for modern subways. They would have worked for streetcars (which is probably what the designers had in mind). In this case their investment didn’t realize any value; a new bridge had to be constructed to accommodate the subway.

What about you? Are your change initiatives considered an expense or an investment? Have your investments paid off? Feel free to share.

One more thing. Suicide is not a topic that most people like to talk about but talking can help. If you are suffering emotional distress or are in crisis and want to talk call 1-800-273-TALK (8255). The number works in both the USA and Canada.

photo credit: Toronto Public Library Special Collections via photopin cc

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This River I Step In: Some thoughts on Change

This River I Step In: Some thoughts on Change

If you travel out of downtown Toronto along Queen Street East you will eventually reach the bridge that spans the Don River.  Atop the bridge is a line of text which reads:

“This river I step in is not the river I stand in”

The quote is paraphrased from the Greek philosopher Heraclitus. Sources seem to agree that what he wrote was actually something like “We both step and do not step in the same rivers. We are and are not.” (Which come to think of it sounds a bit like Yoda).

Heraclitus spent a lot of time thinking about the nature of change, and eventually concluded that permanence is an illusion and that change is the only true reality.  His entire philosophy on change can be summed up in two words – Panta rhei – “everything flows”.

We are a long way away from 500 BC.  Perhaps the passage of time makes simple truths seem archaic, or perhaps our harried lifestyles prevent us from considering the implications of something so fundamentally straightforward.

Here’s what I take away from it:  the longer your change initiative takes the less likely the outcome will match your expectations. Because everything is always changing.

You are aiming at a moving target. It might not feel that way, because you are caught up in the flow of change just like everything else is. But change is unpredictable; in a change initiative of a long duration there are just too many variables in play to be able to accurately predict what the future is going to look like. You have a vision of what you want the future to look like but there are no guarantees. It’s possible that you may get lucky and that the target may remain more or less where you expected to be, but it’s equally likely that the target will not be where you expected it to be, nor will it be what you expected it to be. This makes it likely that you will need a change initiative within your change initiative, costing more money and more time.

That’s a bitter pill to swallow, particularly if you have invested a lot of time and money in first place.

The best way to minimize this risk is to make the change cycle shorter. Your target has less time to shift if the duration is shorter and you will be able make any required course corrections prior to the start of the next change cycle. It will cost less and take less time than the alternative – executing a long duration change initiative and having to stop and restart several times for rework and realignment.

There are added benefits to this approach. Investment is deferred. Benefits are delivered earlier. Change is more gradual, making it easier for the business and individuals to digest.  And the initiative is far easier to manage.

As well as having a much greater probability of success.

More about the artist Eldon Garnet and the art installation (Time and a Clock) of which the bridge is part.

photo credit: gorbould via photopin cc


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Management by Wishful Thinking

Management by Wishful Thinking

“Facts do not cease to exist because they are ignored.” — Aldous Huxley

It started at an off-site meeting.

The President of ACME Inc. and his executive team were off at a three day strategic planning session. They had just finished lunch and the participants were starting to leave the table, checking their emails and making last minute phone calls before the afternoon session started.

As the President pushed back his chair he said to no one in particular, “I wonder if overhauling inventory control could save us any money. I’ve been president 10 years now and I don’t remember ever looking at inventory control.” Something had caused him to recall an article about advancements in inventory control that he had read in an airline magazine during a trip to a recent sales conference. He stood up and started to walk back to the conference room.

Mr. James Keener, the COO, was sitting across from the President and overheard the comment.  Jim had been with the company for about seven months. He was looking for an initiative that he could hitch his wagon to and demonstrate that he was someone who knew how to get things done.  The President wasn’t going to be around forever and when the time came Jim wanted to be his successor.

In the space of the next five minutes the following text conversation took place.

chg phone txt

Jim pocketed his phone and strode purposefully back towards the meeting room; he was on a mission.

At the next break Jim took the President aside.

“I heard what you said about inventory control – it’s something I’ve been looking at. I think we could completely overhaul the process in about eight months.”

The President paused for a second. He was thinking about the presentation that the SVP of Sales had just given on the five year sales outlook; the growth projections were less than he had expected. “What’s the cost and what’s the benefit?”

Jim was ready with the answer, “I’d be surprised if it was more than $1M.  We haven’t calculated the savings yet but I think we’ll break even in less than 18 months.” Jim knew that 18 was the magic number; any initiative with a breakeven of greater than 18 months would be rejected. After a brief pause, he added, “I personally guarantee this will work.”

The President was still distracted by the sales projections.  “If you can do it without any additional staff then go ahead.”

The next day Jim called his staff together for an emergency meeting.

Once everyone was in the room, Jim began speaking, “The President has given us a critical task – we’re going to revamp inventory control. We’ve got six months and $750K to make this a reality.  I realize that this is a lot of work and everyone’s got their day jobs but he made it clear that this the most important task we have.”

There was a rustling of paper somewhere in the back of the room and a voice spoke up. “I don’t see it on the project list anywhere.”

Jim was a go-getter; he was ready for this. “It’s not on the list because it’s not a project.  I’ve told the President we can do it operationally. I know most of you aren’t used to working like this but I am; it’s going to work because I’m running the show. Anybody who doesn’t agree … well, there’s the door.”

And so it began, another initiative born of MBWT – Management by Wishful Thinking.

Why are people so willing to ignore reality and to make commitments and plans based on what they want to happen rather than what is likely to happen? There are many reasons but two of the biggest are rampant optimism and overconfidence.

Rampant Optimism

Some people have a brighter outlook on life than the average person.  They tend to be less risk adverse than average because they have an inherent belief that everything will work out for the best. Optimism is not a bad thing; in fact, a strong argument can be made that optimists are disproportionally responsible for making progress as they are able to persevere through risks and setbacks that would cause an average person to change their course.  But a successful optimist maintains a close contact with reality; they have a positive outlook but aren’t willfully blind to negative scenarios. Rampant optimism is a different matter. When an optimist starts disregarding reality and replaces it with an unrealistic outlook they have stopped being an optimist and have become a dreamer; and in the land of dreams anything is possible.


Confidence is not a bad thing. Look at Jim for example. He’s a COO of a major company; he didn’t get there by accident.  He’s almost certainly got a MBA, and he’s had a series of jobs where he has learned, gained experience and been successful enough to warrant being hired by ACME. He has been successful and has earned the right to be confident in his judgment and his abilities. In fact, Jim has to be confident (or at least perceived as confident); who wants a COO that appears apprehensive or uncertain? The trouble begins when confidence and hubris mix. Problems will ensue when Jim starts believing that he can generate positive outcomes using his sheer force of will. He will ignore or minimize risks, he won’t see potential negative outcomes, and will set overly aggressive plans with little or no contingency.  The result is a failure just waiting to happen.

Management by Wishful Thinking is difficult to counter.  For one thing, it’s contagious. It takes a strong individual to continually play the devil’s advocate in these situations; it’s much easier (and likely less of a career risk) to go with the flow. The best advice I can offer is to make sure that the standard processes and procedures are followed.  Go by the book – there will be pressure to make exceptions and to take shortcuts, particularly once issues arise and the timeline begins to be impacted.  When exceptions are made make sure the particulars are well documented. It’s sad, but once your organization has decided to execute a MBWT initiated there isn’t really much you can do other than to fulfill your responsibilities as completely as possible and to protect yourself by documenting everything.

And how did everything at ACME work out? Revamping inventory control cost ACME $2.3M and it took 19 months. Three people quit and another is off on stress leave. No one is really looking at the payback right now because everyone is just so relieved that it’s over, but when they eventually crunch the numbers they will find the payback period is 33 months. Jim has struck a committee to find out why the development process is so badly broken. He’s promised the President that he’ll get to the bottom of this and make the appropriate changes.

He gave his personal guarantee.

Have you been on an MBWT initiative? Have you ever been on one that’s successful?

Feel free to comment.

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Nightfall – a story about change and consequences

Nightfall – a story about change and consequences

In 1941 Isaac Asimov (who was a prolific writer – he wrote or edited over 500 books as well as hundreds of short stories) published a short story entitled Nightfall.  Set on a distant planet, it’s a classic science fiction tale. The theme of the story is cultural and societal in nature; it’s about the consequences of change and our unpreparedness for it. Even after 70 years its message (and the conclusions we can reach from it) are relevant.

The action takes place on the planet Lagash. It seems to be a planet much like earth but the solar system that Lagash belongs to is unusual; there is one primary sun but there are also five secondary suns. It is never night on Lagash; the inhabitants live in a state of perpetual sunshine because of the number of suns and the complexity of their orbits. Since night never falls on Lagash they are not aware of the larger universe; for them the entire universe consists of six stars and one planet.

The story reveals that scientists have recently made several discoveries. Archeologists have uncovered evidence that the Lagash civilization collapses every 2,000 years. They have proof that there have been nine previous cycles. Astronomers have discovered aberrations in the orbits of the suns, leading them to hypothesize that there is another unseen object in their solar system, which in turn leads them to a theory about the potential of eclipses, one of which is predicted to be imminent. There are also religious nuances to the story.  A group, called The Cult, possess ancient texts that speak about the Night and the Stars, two topics that are dismissed by many of the scientists as mere mythology. But to their credit some of the scientists try to anticipate what will happen if night does fall. One speculates that the universe might be bigger that they had ever considered; maybe one or two dozen suns. Some even build a chamber to simulate how stars might appear (and to see if their appearance drives them mad).

The eclipse begins as predicted and panic builds across Lagash. When totality is achieved and night finally falls to everyone’s horror they find that the issue isn’t the darkness. It’s the stars.

“With the slow fascination of fear, he lifted himself on one arm and turned his eyes toward the blood-curdling blackness of the window. Through it shone the Stars! Not Earth’s feeble thirty-six hundred Stars visible to the eye; Lagash was in the center of a giant cluster. Thirty thousand mighty suns shone down in a soul-searing splendor that was more frighteningly cold in its awful indifference than the bitter wind that shivered across the cold, horribly bleak world.”

And for the tenth time, all across Lagash the cities burn.

I read a lot of science fiction when I was in my teens and I vividly recall reading Nightfall. In re-reading it now I am a bit disappointed when I realize that I kind of missed the point. I originally believed it to be just a good astronomy story (I thought my 14 year old self was brighter than that!) but now I realize that it’s about change, and I see three lessons.

What you see is all there is

In his book, Thinking, Fast and Slow, Nobel prize-winning author Daniel Kahneman discusses the concept of ‘What You See Is All There Is’ – WYSIATS for short. Kahneman asserts (and he has the research to back it up) that because of the way our brain operates we jump to conclusions based on the consistency of information available. In short, we take the information available and create a coherent story out of it.  It’s not the quality or the quantity of information, it’s the consistency of it. Sometimes we think it’s intuition or a hunch, and to quote Kahneman, “Much of the time, the coherent story we put together is close enough to reality to support reasonable action.”

But sometimes it isn’t. The more complex the situation the less lightly that the intuitive answer is correct. In Nightfall, the scientists have their story and the cultists have theirs. Both are reasonable based on the facts that they have gathered, but neither group sees the entire picture.  They only see parts of the whole; yet both groups are confident that they are taking the correct actions.

How can we combat this tendency? Unless you are in a life-threatening situation taking the time for a period of sober second thought is a good idea. Take some time and expand your frame of reference by obtaining extra data or by taking a closer examination of the data you already have. It’s ok to have a hunch, just make sure that you find concrete facts to back up your intuition.

Ignorance is not bliss

The behavior of the characters on Lagesh is different depending on how well they understand what is happening.  The scientists have their calculations, hypotheses and predictions. The cultists have their faith and their scriptures. The general population has neither facts nor faith; they just have their ignorance, uncertainty and fear.

Change initiatives in organizations are no different. It’s my experience that all too often we make the mistake of assuming that because we (the leaders, or designers, or implementers) understand the change initiative everyone else does too. That’s a dangerous assumption.  I think in general organizations do a poor job of helping individuals understand the change that is occurring.  Communication is a good start but it’s on its own it is not enough. In the past I have used an informal tool that I call ‘the Knowledge Continuum’ to measure how well a change initiative is understood.  It looks like this:

Data –> Information –> Knowledge –> Understanding –> Insight

Based on what I have observed the communications for most change initiatives provide a great deal of information, some knowledge and virtually no understanding. (If your organization is an exception, then please accept my congratulations – you should package your methodology and sell it). I believe that the challenge is one of time and cost. It takes an effort (and it could be significant) to move along the continuum, regardless of whether it’s an entire organization or a single individual that is being moved. In my opinion, in virtually every case it is worth making the effort. Your change initiative needs more than a communication plan – it needs an understanding plan. I view this as an investment and the justification for it falls under the realm of risk management. Compare the cost of the understanding plan versus the potential productivity loss you risk from a disengaged workforce. Do the math and see what makes sense.

Prepare to be surprised

Sometimes we are the initiators of change and sometimes we have change thrust upon us.  Regardless of how well prepared you are for change you will face surprises and uncertainties that will need to be resolved. They may not be as big as the one at the end of Nightfall, but even the smallest surprise can result in major setbacks. I remember when my first child was born; I had read dozens of books on baby care and parenting, but reading is different that experiencing.  I was prepared as I could be but in retrospect nowhere near as prepared as I would have liked to be. I remember the first month of  fatherhood as being a very intensive learning experience! But I muddled through and eventually became reasonably competent in the art and science of parenthood.

It can take time prepare yourself for change and to work through the intended (and unintended) consequences of change once it occurs. Temper your expectations and give yourself and your organization sufficient time to prepare for what might happen, to internalize what has happened and to address what still needs to happen.

Interested in reading Nightfall? Check it out here.

photo credit: Skiwalker79 via photopin cc

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When things aren’t self-evident – Three techniques for managing uncertainty

When things aren’t self-evident – Three techniques for managing uncertainty

We have probably all heard this a one time or another.

“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns – there are things we do not know we don’t know.”
United States Secretary of Defense, Donald Rumsfeld

For anyone who hasn’t, take a look here.

I not a big fan of Donald Rumsfeld, but in this case he is 100% correct.  Known knowns, known unknowns, unknowns unknowns.

The first two represent risk and the third uncertainty. And if you are managing a change effort the absolute last thing you want to encounter is an unknown unknown.

Most people use the terms risk and uncertainty interchangeably but they represent two fundamentally different things.

Risk is a lot more tangible as it refers to situations of which that you are aware. It’s manageable because you can look at the risk objectively, look at the likelihood of it occurring, look at the consequences if the risk actually occurs and then decide what mitigations or controls need to be put into place to manage the risk. This works pretty well, even though most people really don’t have a good way to predict either the likelihood or the consequences. Calculating probability is not necessarily as simple as it looks (but that’s a subject for a future post).

Uncertainty is a different matter altogether.  Because it’s an unknown unknown it can’t be predicted; in essence it’s a surprise. It’s a ‘black swan’ event. The term black swan has been around since Roman times but has been redefined by Nassim Nicholas Taleb (in the book of the same name) as an event that:

  • Is unpredictable
  • Has major consequences
  • In hindsight, appears as if it should have been predicted.

Think 9/11. Or the 2008 subprime crisis or the ensuing financial meltdown. Or the 2011 Tōhoku earthquake and tsunami in Japan. Black swans occur in your personal life as well. You get called into your manager’s office and are told your position is eliminated. Your spouse packs up and leaves. Your doctor looks at your test results and you hear the word ‘cancer’. Or, on a much more positive note, you look at your lotto ticket and you realize that you are a millionaire.

The very nature of a black swan event makes it impervious to traditional risk management approaches. So how do you protect your change effort from the consequences of a black swan?

You have to make your change effort robust so it is both flexible and responsive to unexpected change. I can suggest two strategies and one technique.

Get the right people on your team

Having the right people on your team can take you a long way towards reducing the longevity and the severity of an unexpected crisis.  If I am managing a change initiative I want people on the team with ‘guts’ – or as Hemingway described it – ‘grace under pressure’. You need people who will remain objective and clear-headed when they are under pressure; people who can be both patient and decisive, waiting until the time is right to act and then acting with authority. One of the challenges with this approach is that you really don’t know how an individual will react to pressure until you actually see them under pressure. But when you find them keep them for they are more precious than gold.

There is a prerequisite that need to be in place for this to work. People need to be able to speak their minds. In a lot of organizations the opposite is true. Positive feedback is encouraged but anything else is strongly discouraged; any feedback that isn’t positive is perceived as a challenge to the authority of the leadership. It’s a shame, because organizations and leaders are missing out if they are deaf to the informed opinions of their people. (Notice that I’m only referring to ‘informed opinion’. Everybody has opinions but that doesn’t mean they are all worth listening to.) Being willing to listen requires strong leadership; most people don’t like hearing that their baby is ugly (even just a tiny bit) and leaders are no exception. Hearing positive feedback is easy; negative feedback not so much. It requires a degree of objectivity and detachment that many leaders find difficult to achieve.

Leaders should make the effort. The establishment of a work environment that encourages individuals to speak their minds (maybe ‘encourages’ isn’t a strong enough word – ‘rewards’ would be better) is a huge asset for an organization. Subjecting proposals for change to scrutiny by in-house (and external, if necessary) subject matter experts raises issues and concerns sooner, which leads to them being resolved earlier.  It could also result in the change initiative being postponed or terminated. The earlier work stops on a bad idea the better it is for an organization.

Build contingency into your timeline and budget

When you are constructing your timeline for the change effort do not take a blue sky view. Too many change initiatives are scuttled because the leadership assumes nothing will go wrong and when it does they have neither the time nor the money to deal with the issue in the appropriate manner. Make the opposite assumption instead; assume that there will be issues and plan build additional time and money into your plan. The amount of the contingency needs to be based on the degree of familiarity with the space where your change management is operating.  For example, suppose you are developing a simple life insurance product for a company, but it’s something that is done regularly and there is a clear methodology to follow. The amount of contingency will be less (probably much less) than if the development is for a complex product being developed for the first time.

Hold a pre-mortem

The idea of a pre-mortem is simple but it is a powerful technique.

  • Get your team and stakeholders together, give them all a pen and some paper.
  • Set this scenario – it’s a year after the end of the change initiative. It failed, and it failed badly. Think of the Hindenburg – this was worse. Because of the failure friends are no longer friends, people have lost their jobs and careers have been ruined.
  • Ask them to answer this question: What happened? What were the reasons that it failed?
  • Have each of them list the reasons for the failure.
  • When everyone is finished, have them share their lists, one reason at a time until all the reasons are captured.
  • Following the meeting, consider each of the reasons. Some of the reasons will be risk management concerns and can be managed by that process.  The remainder are items of concern that you need to consider and that should be taken into account when determining how much contingency is required.

Essentially you are trying to make the future a little bit less unknown by leveraging the knowledge and expertise of your team to envision problem scenarios and to consider the best way to respond to these scenarios in advance of them occurring.

(The concept of a pre-mortem was developed by Gary Klein and is described in his book The Power of Intuition.)

Uncertainty is daunting, but it’s a fact of life; we need to learn how to manage it better. I’ve given some suggestions on how to do just that – please feel free to share your approaches and techniques. If nothing else, it’s good to think like a Boy Scout – ‘Be Prepared’.

photo credit: LaPrimaDonna via photopin cc

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We hold these truths to be self-evident, part 2. Three self-evident truths you must consider before implementing change.

We hold these truths to be self-evident, part 2. Three self-evident truths you must consider before implementing change.

My previous post was about the Declaration of Independence and how it’s a compelling example of a change manifesto. I can’t stop thinking about the phase ‘we hold these truths to be self-evident’. It has been tumbling through my brain incessantly, and the more I think about it the more I am awestruck.  The word ‘self-evident’ is absolute genius. (Fun fact: the original draft used the terms ‘sacred and undeniable’.)

Self-evident is a wondrous term. The word ‘evident’ is from the latin ‘evidens’; it means ‘obvious to the eye or mind’. The Founding Fathers are basically saying, “Don’t even think of arguing about this because it’s as obvious as the nose on your face. Don’t waste our time.”

And then this got me thinking – are there truths that I hold to be self-evident?

Surprisingly, there aren’t that many. I’m not typically a ‘black/white’ kind of guy; I’m more a ‘shades of grey’ person. (I know what you are thinking and you can stop right now. I can see far more than just fifty.)

But I do hold a few self-evident truths. From the perspective of change management, there are three.

I hold these truths to be self-evident: That you know less than you think you know, that you have less control over things than you think you do, and that there are no silver bullets.

You know less than you think you know

One of the challenges that you have is that while you possess a certain depth and breadth of experience (and it may be considerable) as well as a body of knowledge that spans many areas (which also may be considerable), you also have a set of biases, preconceived notions and beliefs (which are definitely considerable).  It is these beliefs that cause you dismiss or to not even consider options that lie outside your experience. This behavior is called confirmation bias. When confirmation bias takes hold you start to only see facts that support your preconceived notions and tend to dismiss objections and exceptions as irrelevant or immaterial. You also start to underestimate the difficulty of the task at hand because you are focusing on the desired outcome rather than likely outcome.

How should you combat this?  How do you counteract your own tendency towards ‘blue sky’ thinking? I have a few suggestions. Research initiatives that are similar in nature and learn from their success, and more importantly, their failures. Engage some individuals with relevant experience to review your plans. Get someone who you trust to act as a devil’s advocate and work on developing clear, objective arguments against the approach you are taking and then make sure you can counter the arguments. When exceptions arise don’t dismiss them out of hand, ask why they occurred and make sure that you get real answers. Invest some time in searching for evidence that contradicts your assumptions.

You have less control over things than you think you do

There are a number of things that you can control. You can control your behavior. If you are in a position of authority to some degree you can control the behavior of others. You can control how time is allocated. This is good news if you are an operations manager or a project manager because controlling the tasks performed by the individuals who report to you is critical to getting work done. But there is bad news as well; there is a multitude of things you can’t control; these things are not normally considered in your decision making process because you are operating under the illusion of control. You can’t control the weather. Or when someone falls ill.  Or wins the lottery. Or gets hit by a bus. Or when they have an argument with their spouse and spend the whole day wondering why they got married in the first place. Or when a server blows up or an assembly line fails. Or when a critical supplier or customer unexpectedly goes out of business. The list goes on and on. The universe of things that you can’t control is vastly larger than the one where you have control.

Planning for foreseeable issues is risk management.  The real challenge arises when you need to plan for unforeseeable risks – for uncertainty. For this there are no easy answers. Build contingency into schedules. Hire competent people and make sure you keep them engaged. Model and simulate the end state and see where the breakdown and bottlenecks occur. Establish metrics and monitor them, and don’t ignore the exception cases. And when an uncertain event occurs, be prepared to react quickly and decisively.

There are no silver bullets

Human beings like easy. Easy is good, it’s understandable and it doesn’t require a lot of effort on anyone’s part. Need proof? Watch late night TV for a little while and you will see exercise machines that will remake you in just 20 minutes a day; diet regimens that cause the pounds to just melt away; a countertop oven that can cook your entire Sunday dinner in less than an hour. Plus you can find love – just dial this phone number now, operators are standing by!

The software industry is rife with companies that promote their software as the be all and end all. Just buy Acme WhizBang! Version 1.0 and watch your productivity skyrocket! Guaranteed improvements of up to 200%! Installs in less than a day! Up and running in a week! Except … except it’s just in beta testing, it’s never been integrated into an environment like yours, the training material isn’t complete and our company is bleeding money and is trying to sell itself to Google or Oracle or to anyone who’s buying. But please don’t delay – this software is all you need!

Don’t be fooled. Successful change requires clearheaded thought and significant effort – anyone who tells you otherwise is misleading you.

But what do you think?  Am I too pessimistic? Or maybe too pessimistic? Are there self-evident truths that I should have included? Feel free to comment!

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